As devastating impact a bankruptcy could have on your credit as well as your lifestyle, it is considered the final resort.
If you have more debt than you can imagine to ever pay back, then you might consider bankruptcy.
You will find various kinds of bankruptcy:
This process is the most frequent type of bankruptcy filed in the United States, and it might exonerate you of any obligation to settle your unsecured debt. It is more like starting your financial life over with a clean slate, however the consequences could be serious. Your credit may be tarnished for several years to come and your assets may be sold to settle your debts. Chapter 7 bankruptcy won’t clear you of most tax obligations or any federal student loan debt. When you have a balance on these, you still accountable for paying it back. Qualifying for Chapter 7 is becoming more challenging because the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 introduced stricter means testing.
Since it became harder to be eligible for Chapter 7, more individuals are required to go into Chapter 13. If you declare Chapter 13 bankruptcy you will still need to repay some of your entire debts over time, but in some instances a few of your financial situation might be paid off. Once a repayment plan has been exercised, you make payments to the court. The court then distributes money to your creditors at the direction of a court-appointed trustee. Needless to say, it’s an extremely intrusive process.
Chapter 13 bankruptcy takes longer and costs significantly more than Chapter 7, but homeowners who work out a repayment plan using their bank might be able to keep their property.
Both types of bankruptcy will severely damage your credit, therefore the decision to seek bankruptcy relief shouldn’t be taken lightly. Ensure that you talk to legal counsel licensed in your jurisdiction before choosing this program.